The Surreal Estate

Perspectives on Tenant Organizing from the Urban Homesteading Assistance Board

Tag Archives: Wall Street Journal

Predatory Equity fails again…and no one is surprised.

Today the Wall Street Journal published an article about yet another Predatory Equity deal that has fallen into foreclosure. This huge 42 building portfolio of affordable housing spread over the Bronx, Brooklyn and Manhattan is known as the Three Borough Pool. UHAB along with out allies have been expressing concern for these buildings for years. We began organizing

The portfolio is a classic Predatory Equity deal: a group of well known private equity groups including Normandy Real Estate, Vantage Properties, Westbrook Management and David Kramer, purchased the properties with an inflated mortgage from Wachovia Bank, who quickly sold the debt into a commercial mortgage backed security. Several of the owners are now notorious in NYC for tenant harassment in other properties. According to Normandy’s website their business strategy is to “target value-add and distressed asset and debt opportunities in high-quality locations… We identify assets that are underutilized, have operational inefficiencies, or have below-market rents.

“Under-utilized assets” is landlord-speak for “home to low income families who we think can easily be evicted.” This was certainly their plan in the Three Borough portfolio. As with most Predatory Equity deals, the tenants began facing harassment and building conditions began to decline. Rents continued to rise, leases citing MCI increases on elevators that continued to break down and roofs with reoccurring leaks. Default rumors began spreading as early as 2010, and when the mortgage became due in full in 2012, LNR partners stepped in as special servicer for the CMBS to deal with the fall out.

UHAB began organizing some of the buildings in 2009, and CASA has had an established tenant association in one of the largest buildings in the portfolio for many years. According to security documents, the buildings were 94% occupied at the time of purchase. And tenants did not bend to their landlord’s harassment tactics — they refused to be displaced — directly leading to the portfolio’s failure.

UHAB is working with organizers from CASA, New York Communities for Change, Mothers on the Move, Banana Kelly and PACC to engage tenants across the portfolio.  Our efforts have been met with extreme harassment from Colonial Management, who manages the entire portfolio. David Kramer, one of the owners in the deal, is a partner at Colonial Management. Supers and property managers have attempted to lie to tenants about meetings being cancelled, tried to impede on tenants rights to have a meeting in the lobby and have even out-right lied by passing out flyers that denied the buildings are in foreclosure:

Colonial notice not in foreclosure

This only intensifies the frustrations of tenants who have been suffering from problems with management for some time.  Neglect of the buildings have caused serious problems for the families who live in them.  Conditions like mold, leaks and vermin are not uncommon in the buildings. The WSJ article published a map along side the article which highlighted the code violations across the properties:

WSJ Violation Map

The WSJ article also mentions a possible deal on the table to end the foreclosure, although their source is anonymous. Considering that the portfolio has been in default for almost three years, we happen to think that any investor would be mad to refinance this portfolio without a significant mortgage write down. Ultimately, this is what the tenants need. Any refinancing should not be negotiated behind closed doors with sources that refuse to be named in the press. Tenants deserve (and demand) a voice at the negotiating table.

LNR Partners’ decision on how to deal with this portfolio will affect over 1,500 families. Working with tenants, they could transfer the buildings to a housing developer who will work alongside residents to respect their rights, ensure good repairs, and keep the buildings affordable. However, LNR could also work with the current management and transfer our buildings to another speculator with the same, unsustainable mortgage. This would cause tenants to live through another round of harassment and neglect. Tenants are joining together to fight LNR and Colonial Management because they have no other choice: the buildings are an important source of affordable housing, and losing these 1500 units to another speculator would be devastating for New York City. Join UHAB and our allies in standing with the tenants of the Three Borough Pool and demanding a better deal! 

City Council to Pass Underlying Conditions Bill

Today, the NYC council will vote to pass a bill, sponsored by Councilmember Gail Brewer, that will force city slumlords to abandon quick fixes in favor of high quality, lasting repairs. The bill is based on the city’s relatively successful AEP program, which gives the city the power to repair problems themselves as well as collect both the costs and fees of the service.

The bill is the result of hard work and cooperation between the New York City Council and the housing advocacy community, including UHAB, Tenants and Neighbors, Legal Services and ANHD.

This morning, Speaker Christine Quinn and Councilmembers Gail Brewer, David Greenfield, and Robert Jackson expressed their support for this bill in a press conference at City Hall.  In arguing for the bill’s passage, she told the story of Kymm Moore, a tenant that formerly lived at 836 Faile Street — a building UHAB has been organizing for over a year. 836 Faile Street was in foreclosure for several years when private equity company Stabilis Capital Management purchased the mortgage, presumably hoping to make a quick buck.

While living at 836 Faile St., Kymm suffered from recurring leaks and mold. Because of the recurring  nature of these problems, the City Council believes that passing this bill will successfully eradicate these issues. Both Speaker Quinn and Councilmember Brewer noted that the program will lessen the cost of housing code violations for New York City tax payers, by reducing costly inspections and providing the City with stronger tools to collect fees.

Last month, the New York Daily News visited tenants at 1507 St. Johns Place and spoke with them about their views on the measure. While tenants are hopeful that the bill will improve the quality of repairs, 1507 St. Johns Place, like 836 Faile St., is in foreclosure. The bill does not address how it will hold non-owner receivers responsible for the same repairs as landlords. In New York City, multifamily buildings continue to face foreclosure in startlingly high numbers, and the overloaded Supreme Court means many buildings stay in foreclosure for several years. It is necessary that the City of New York hold receivers and banks responsible for housing conditions as well as landlords.

Stay tuned as more articles come out about this exciting measure today! We’ll be posting them here.

City Council to Push Owners for Core Repairs,” Wall Street Journal

“City Council Demands Landlords Fix Underlying Conditions in Apartments” NY1

“City Council Pushes Bill for Housing Fix” WNYC

“Council Wants To Force Landlords To Fix ‘Underlying Conditions’” Gotham Gazette

“NYC Landlords Must Fix Problems Under New Law” The Epoch Times

“New NYC Law Puts Increased Pressure on Slumlords to Make Needed Repairs,” NYDN

Life After Sandy: Will NYC Finally Invest in Affordable Housing?

Today, the Wall Street Journal reported that Sandy victims will be given priority for about 2,500 vacant apartments owned by private landlords across New York City. Participating companies vary from Two Trees Management (arguably a predatory developer associated with the controversial Domino Sugar project) to L+M Development Partners (a respected affordable housing developer that recently purchased the Ocean Village project in Far Rockaway.)

According to FEMA, nearly 96,000 households in the region are eligible for housing aid.  This still-developing agreement between the city and private landlords may only provide 2,500 units but is a significant first step in a long battle to ease this housing burden. The public-private coalition has overcome some significant barriers, including length of lease: federal and state law typically requires at least a 12 month terms for rent to be offered below market, but this housing situation may be temporary for some tenants. The plan raises some significant questions about recent trends in the New York City housing market and how we can move forward to ensure it meets the needs of ALL New York City residents.

As any New Yorker can tell you, the rent in this city is “too damn high.” The city has a historically low vacancy rate, hovering around 3%. Rent regulation laws are extended by law makers every year depending on the vacancy rate — typically contingent on whether or not there is a housing “shortage,” generally defined as a vacancy rate lower than 5%. New York City hasn’t had a vacancy rate lower than 5% since the rent regulation laws were first enacted nearly five decades ago. In one fell swoop, Sandy diminished the supply of affordable housing in New York, while increasing an already outsized demand. The market is tight, and the need is urgent. Giving priority to Sandy victims (who certainly do need it) will likely exacerbate this existing housing shortage, as there is a huge demand for overpriced apartments in this city even in the best of times.

Not only has Sandy made the housing situation in New York City much, much worse, it has thrown into the spotlight the fact that affordable and low income housing has not been a legislative priority for some time. In the post-Sandy housing crisis, we are calling on our New York elected officials to prioritize rehabilitation of existing housing stock over new developments. While we continue to invest in new developments and affordable housing that espouses gentrification over long-term affordability, tenants in NYCHA and low income rent regulated buildings suffer. While the city has invested millions into projects like the Barclays Center (still waiting for affordable housing to break ground here), Section 8 is frozen, and NYCHA’s waiting list is 16,000 families long. Sandy made this long-relevant problem more visible than ever.

Today, the New York Times editorial board published an opinion piece, “The Affordable Housing Crisis,” which calls on elected officials from President Obama on down to take new proposals to make rental housing affordable seriously.

[Low-income] families skimp on food and medical care to make the rent and tend to move often, making it difficult for their children to be successful at school. They are also more prone to homelessness, which is traumatic for them and extremely costly for the municipalities that run shelters.

Yet even as the need for affordable housing has grown, such units have disappeared. Over the last two decades, for example, private landlords have removed more than 200,000 apartments from subsidy programs so that they could raise rents. And, faced with weak federal support and no money for repairs, the local housing authorities that manage federally supported developments have boarded up or torn down more than 150,000 units.

This piece is distressing in the context of the national low income housing crisis. In New York City, with a choked market and a demand that increases daily, the situation is much more dire. It’s time for a change, for a real investment in affordable housing. If you didn’t already know so, Sandy just told us.

US Government Continues to Push Westchester County for Fair Housing

It’s been years since The US government started its battle Westchester County, NY over a Fair Housing lawsuit. After being sued in a housing segregation lawsuit in 2009, Westchester County was mandated to construct 750 units of affordable housing to desegregate the suburban communities, economically and racially.  Westchester is known for its stereotypical White and wealthy suburbs, and this lawsuit is an attempt by national government to implement more inclusive housing policies throughout the country.

While Westchester has been on schedule in terms of constructing new units of affordable housing, HUD is asking officials to comply “more fully.” According to an article published this week in the Wall Street Journal, HUD is asking Westchester to promote a bill which would prohibit landlords from rejecting tenants with Section 8, as well as analyze potentially racially discriminatory zoning laws.

In defense, Westchester officials are claiming that their zoning policies reflect the desires of their constituents.    County Executive Rob Astorino told reporters:

“The last thing we want,” he added, “is five years from now, for people to say, ‘What happened? Why is this neighborhood completely inside-out now? Why do I have a six-story government housing project or building or townhomes in my neighborhood when it wasn’t zoned for that when I moved in here?

NIMBY anyone? We think that HUD Assistant Secretary John Trasvina says it clearly (in the same article):

“The source of income of an individual is often used to deny them housing,” Trasvina said. “Quite frankly, it’s often used as a proxy for race or national origin.”

When racial and economic injustices are so intertwined, it is almost impossible to separate one from the other when thinking about national policies and implications on communities.  As we discussed in our previous blog post about the connection between urban zoning, affordable housing, and access to quality schools, when people are zoned into separate sections of a city based on income levels, access to basic services  and even basic rights (including quality education) is unequal.  When you bring race into the equation, it’s despicable.

If ethics or law won’t change Westchester’s behavior, perhaps money will.  HUD is holding $12 million for local projects until the county complies, and is even threatening to fine the county for acting in contempt.  It’s serious.

In light of our country’s awful history with racist zoning policies, HUD’s strong stance that Westchester needs to take the lawsuit seriously and change its discriminatory ways is pretty hopeful.  Could it be a sign that national policies are shifting to create a more just housing system?  We’ll believe it when we see it.

Affordable Housing: Apply Online!

About 4,000 affordable apartments financed by New York City become available each fiscal year, and about 160,000 people enter lotteries to live in them. These apartments are typically owned by private developers – usually community groups or development sponsors – and to enter these lotteries, New Yorkers who meet the low income requirement have to mail a paper application to each developer of each building they are interested in applying for.

Like many public welfare programs, applying for affordable housing in New York City can feel like something out of the Dark Ages. In an era where the internet and computers streamline nearly everything, Food Stamp records, for example, are still hand written and kept in file folders at local offices. It would be kind of endearing, in an obsolete way, if it didn’t make so many peoples’ lives so difficult.

Starting this morning, though, applicants seeking to rent or buy an apartment in Westwind Houses in East Harlem or Richmond Place in Queens will be able to create user profiles and submit applications online, at http://www.nyc.gov/housingconnect. By the Fall, the program will have expanded to include all new affordable housing development projects financed by NYC.  Applicants will be able to create an online profile and submit it to as many site specific lotteries they wish, simply with the click of the button.

Of course, this is a vast improvement over the previous system. City Council speaker Christine C. Quinn told the New York Times,

“It will open up a system to more New Yorkers, and create the potential for more New Yorkers to access housing out there in the five boroughs,” she said. “They say you have to be in it to win it, and we’re trying to create the chance for more New Yorkers to be ‘in it’.”

However much of an improvement this change is, it is also important to be mindful of growing issues of inequity in internet access. First, the internet is not nearly as ubiquitous as we might think. According to a New York Times article, “The New Digital Divide,” the United States (the country that invented the Internet) ranks 12th in the world among developed nations for wired internet access at home. Though 93% of households making over $100,000 access the internet at home, 40% of those making below $25,000 a year do. (And who do you think is applying for affordable housing?) In African American and Hispanic households, 55% and 57% of families have wired internet at home. Though paper lotteries will still be available for those without access, it remains to be seen how these will be integrated into the broader, online system.

Perhaps more importantly, this change reminds us of just how far we have left to go. If it does what it hopes to do, and I think, digital divide aside, it will, more people will be encouraged to apply for affordable housing.  This means that even more than 160,000 people will be applying for just 4,000 spots each fiscal year. It makes the fact that the promised affordable housing development at Atlantic Yards and Willets Point has been pushed back indefinitely even more shameful. The ongoing cycle of overleveraging and foreclosure in rent regulated multifamily housing presents an additional threat to the city’s affordable housing stock. Though these buildings are not city subsidized and are not in the lottery system, their existence provides affordable homes to hundreds and thousands of people, and losing these units through predatory equity would put even further strain on the system.

The bottom line is we need more affordable housing in this city, not less, and I expect that this program will highlight this fact.

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